Studio apartments in Sofia: Legal challenges

Studio apartments in Sofia recently became a market hit. Almost half of all small 1-bedroom or single-space apartments offered for sale or rent are studios, and almost all of them are being offered on the market as "apartments", and not as studios. The reason for this practice is the escalating real estate pricing  in Sofia and other major cities in Bulgaria, as well as the rapidly developing new contruction. So,

What follows?

Currently, the housing properties, and especially the small to medium size apartments (up to 60 m²) are among the most sought after properties. Their purchase prices in Sofia for the 2021 - 2022 period range on average between EUR 1800 - EUR 3300 per square meter. The high demand for small apartments, and the lower construction requirements regarding "studio apartments" as opposed to actual apartments, resulted in an escalating construction of studios. They get a fast market realization, and then go out on the re-sale or rental market in Sofia and other major Bulgarian cities, being advertized as "apartments". And here's where things get a little messy, and lost in translation and terms:

 

What's the difference? Is there any ?

"A Studio apartment" = "an ATELIER" by the laws in Bulgaria. An atelier is a semi-housing / semi-office property. Its statutory definition and function clearly defined by law: "A place for individual creative activity" (Art. 38, para. 1 of the Spatial Planning Act (SPA)) "An apartment" (also "a flat") = "a RESIDENTIAL PROPERTY" . It means, a place to reside in, as opposed to any other place for business, creative, or storage purpouses (§ 5, point 30 of the SPA). A long list of overly complicated statutory requirements are still applicable for a property to be defined a RESIDENTIAL PROPERTY (regulations in the SPA, and Ordinance №7). Hence, Bulgarian laws don't recognise the term "Studio apartments". They don't grant them an equal or similar status to that of an apartment. Therefore, the term Studio apartment is, strictly speaking, a legal non-sense that targets English speakers, using a well-known term and meaning for other countries, that has little legal support in Bulgaria.

Didn't new statutory provisions of 2021 change studios to apartments?

This is another marketing myth that became viral. It has but little to do with actual statutory framework.
The only changes that were made (§ 5, point 29 and point 29a of the Spatial planning act) , refer to defining the status of a building, and not a single unit inside it. After the new provisions, when defining an entire building's purpose as "a Residential BUILDING" or "A mixed/nonresidential BUILDING" , the aggregate amount of ateliers are to be counted as residential properties.

The practical impact and purpose of these new regulations is decreasing the building requirements and costs for construction companies, rather than anything else.
However, this changes nothing about the single unit's own legal status and purpose. Hence, the statutory permitted usage of said properties. This status differentiation, that still exists and is in force in Bulgaria, brings a lost of specific

Risks for Studio apartment buyers and tenants

they often tend to be unfamiliar with, while entering a contract:

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  Usage of Studio apartments is permited for residence - except when it's not

  
  

An explicit regulation (Art. 178, para 4 of the SPA) still applies. And it prohibits the usage of any construction/unit, in aversion to its original purpose or violating their exploitation terms. An established violation results in sealing the object/ cohersive termination of usage, and termination of utilities services (electricity, gas, heating, phone is being cut off). That's foreseen under Art. 178, para. 5 and 6 of the SPA. Such aversing usage is very common in practice; for instance offices in residential apartments, apartments in shops, ateliers or garages, etc.  It's "a tolerated status quo" state authorities look the other way about, rather than anything else. But, technically speaking, it's illegal and, under certain circumstances, the above actions are not impossible. This is a risk every purchaser and buyer of a studio must understand, before placing their signature.

Utilities costs

Different pricing is applicable for "residential"and "non-residential" clients of electricity, gas and heating. This may lead to significatnly higher costs for the latter. Recently, utilities companies allow the transition of studios to the cheaper residential tariff. However, this approach has little to do with the statutory definitions of residential and non-residential customers (§ 1. , point 2a and § 1.,  point 33a of the Energy Act (EA) Whatever practice and policies are currently adopted, in this case they rely on every company's own interpretation, and that can be subject to change at any time (see above bullet why).  

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  Registration issues

Whether or not you can register a person's residence at a studio apartment's address is still an open issue, with no end resolution forseeable for now. On the one hand, the law explicitly prohibits using any construction unit outside its actual purpose - i.e., prohibits the usage of studios for residence. See above. In this reference, there's also an official statement of Sofia city municipality' mayor.

On the other hand, it's a well-known fact that some municipality authorities tend to allow this, while migration authorities rather don't. Also, there's some case law that gives "thumbs up" to studio residence registration (AC - Razgrad's Resolution of 15.12.2021 г. on a.c. № 242 / 2021; SCAC's Resolution № 4113 / 18.6.2018 on a.c. № 2971/2018). These are but random resolutions that aren't mandatory. The issue remains unsolved, neither by law, nor by mandatory court (interpretative) resolutions.

These are some of the most common and crucial risks, without digging into specifics (such as taxation discount options, inaccessibility, etc.).

That's why "a studio apartment and an apartment aren't the same thing". Not at all. Studios can offer many benefits to owners and tenants - the first of which should be a significantly lower price, compared to an actual apartment with similar parameters. These differences are rarely correctly understood and taken into consideration on time. There is no "right" and "wrong" business decision from legal prespective. Only an informed and uninformed one. And the latter costs dearly.

Author: atty. Malena Sheytanova, a Corporate and Civil law attorney with a specialized expertise in Real estate contracts and transactions. For more information and support you can contact us here.

©atty. Malena Sheytanova, 2023

This article provides overall information and is not intended to provide or be used as a legal advice or consultation. Using this article's content is permissible only upon acknowledgment of the author and the source.